We ran through the balance sheet after Thanksgiving, and changed some things. Regards production, TX keeps bleeding cotton from a poor 2nd half of summer, then unwanted rain, snow, sleet and the 4 Horsemen of fall. This state can’t catch a break. We cut 300 kb from US production, just about all from TX. Regards final shipments, this thing is really tough. The current export total right at 3.1 Mb projects to something between 13.8 Mb to 14.7 Mb. Then there is the cumulative sales figure, which projects to 16.0 Mb to 17.0 Mb. The best ever sales was the Step 2 death year of 05/06, hitting 18.45 Mb and shipping 18.04 Mb. The current slope of the cumulative sales projects a sky-high 18.15 Mb. Whoa now, don’t be putting that into your spreadsheet. There are miles to go and bales to count before we sleep on this number.
This time of year we like to use the standard avg of 60% of total supply to estimate final exports. That would be 15.4 Mb, well below the current USDA’s 16.5 Mb. If we use our new production estimate, and keep exports at 16.5 Mb, the ratio is 65%, about where last year’s ratio fell. Using maybe half a dozen methods to estimate exports, the results are simply too wide and varied to expect any accuracy now. We will hold to 16.5 Mb with an idea that this thing can and probably will change much, down the road.
What does a carryout of 5.8 Mb and a ratio of 27.4% do for price? Not much. Ratios of 24.3% and 29.8% were seen in 14/15 and 15/16, with price boxes of 7150/5700 and 7515/5566. Current price is smack dab in the middle of those boxes, and so is the ratio. One can come down hard on a “fair” price now, and thats where we are. The price box for this year is 6600/5620, suggesting the low is likely in, with some room above 6600 to probe. But not much.
Moving averages are slowly becoming flat, as is momentum, as is price. The only positive is a couple of seasonals, ending on 1/02 and 2/02. The only short term trade idea is to buy Mar and use a stop loss around 6365, which is slightly under the low of 7 weeks.
As always, please use protective buy and sell stops when trading futures and options.
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